TRITON INTERNATIONAL LTD - 20-F - 20250228 - NOTES_TO_FINANCIAL_STATEMENT
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Description of the Business and Basis of Presentation
Description of the Business and Basis of Presentation
Triton International Limited ("Triton" or the "Company"), through its subsidiaries, leases intermodal transportation equipment, primarily maritime containers, and provides maritime container management services through a worldwide network of service subsidiaries, third-party depots and other facilities. The majority of the Company's business is derived from leasing its containers to shipping line customers through a variety of long-term and short-term contractual lease arrangements. The Company also sells containers from its equipment leasing fleet as well as containers specifically acquired for resale from third parties. The Company's registered office is located in Bermuda.
The Consolidated Financial Statements and accompanying notes include the accounts of the Company and its subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Certain reclassifications have been made to the accompanying prior period financial statements and notes to conform to the current year's presentation.
Note 2—Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and subsidiaries in which it has a controlling interest, and variable interest entities of which the Company is the primary beneficiary. The equity method of accounting is applied when the Company does not have a controlling interest in an entity but exerts significant influence over the entity. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in the financial statements. Such estimates include, but are not limited to, the Company's estimates in connection with leasing equipment, including residual values and depreciable lives, values of assets held for sale and other long-lived assets, provision for income tax, allowance for doubtful accounts, components of compensation, goodwill and intangible assets. Actual results could differ from those estimates.
Segment Reporting
The Company conducts its business activities in one industry, intermodal transportation equipment, and has two reportable segments, Equipment leasing and Equipment trading. The Company also segregates total equipment leasing revenues and total equipment trading revenues by geographic location based upon the primary domicile of the Company's customers.
Concentration of Credit Risk
The Company's equipment leases and trade receivables subject it to potential credit risk. The Company extends credit to its customers based upon an evaluation of each customer's financial condition and credit history. Evaluations of the financial condition and associated credit risk of customers are performed on an ongoing basis. As a percent of its lease billings, the Company's three largest customers accounted for 20%, 19% and 13% during 2024, 20%, 17% and 12% during 2023 and 20%, 17% and 11% during 2022. Similarly, as a percent of its accounts receivable, the Company's three largest customers accounted for 17%, 11% and 10% as of December 31, 2024, and 19%, 14%, and 10% as of December 31, 2023.
Other financial instruments that are exposed to concentration of credit risk are cash and cash equivalents, and restricted cash balances. Cash and cash equivalents, and restricted cash are held with financial institutions of high quality. Balances may exceed the amount of insurance provided on such deposits.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Measurements
Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value may require an entity to make significant judgments or develop assumptions about market participants to reflect risks specific to the asset being valued. The Company uses the following fair value hierarchy when selecting inputs for its valuation techniques, with the highest priority given to Level 1:
•Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities;
•Level 2—inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
•Level 3—unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
Cash and cash equivalents, restricted cash, accounts receivable, equipment purchases payable and accounts payable carrying amounts approximate fair values because of the short-term nature of these instruments. The Company's other financial and non-financial assets, which include leasing equipment, net investment in finance leases, intangible assets and goodwill, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required, the Company may determine that these assets should be written down to their fair value after completing an evaluation.
For information on the fair value of equipment held for sale, debt, and the fair value of derivative instruments, refer to Note 4 - "Equipment Held for Sale", Note 7 - "Debt" and Note 8 - "Derivative Instruments", respectively.
Cash and Cash Equivalents
Cash and cash equivalents consist of all cash balances and highly liquid investments having original maturities of three months or less at the time of purchase.
Restricted Cash
The Company's restricted cash relates to amounts held at financial institutions pursuant to certain debt arrangements. The restricted cash balances represent cash proceeds collected and required to be used to pay debt service and other related expenses. In certain instances, the Company segregates cash receipts that are to be paid to a third party as restricted cash until paid.
Allowance for Doubtful Accounts
The Company's allowance for doubtful accounts is estimated based upon a review of the collectability of its receivables. This review is based on the risk profile of the receivables, credit quality indicators such as the level of past-due amounts and economic conditions. Generally, the Company does not require collateral on accounts receivable balances. An account is considered past due when a payment has not been received in accordance with the contractual terms. Changes in economic conditions or other events may necessitate additions or deductions to the allowance for doubtful accounts. The allowance for doubtful accounts is intended to provide for losses in the receivables, and requires the application of estimates and judgments as to the outcome of collection efforts, among other things. The Company believes its allowance for doubtful accounts is adequate to provide for credit losses expected in its existing receivables.
For the Company's net investment in finance leases and accounts receivable for sales of equipment, the Company measures expected credit loss by evaluating the overall credit quality of its customers. Expected credit losses for these financial assets are estimated using historical experience which includes multiple economic cycles, customer payment history, management's assessment of the customer's financial condition, and consideration of current conditions and reasonable forecasts.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net Investment in Finance Leases
The Company has entered into various lease agreements that qualify as finance leases. These leases are long-term in nature, ranging for a period of three to fourteen years, and typically include an option to purchase the equipment at the end of the lease term for a nominal price that the Company deems reasonably certain to be exercised. At the inception of a finance lease, a net investment is recorded based on the gross investment (representing the total future minimum lease payments plus the estimated residual value), net of unearned income. Unearned income represents the excess of the gross investment over the fair value of the leased equipment at lease commencement. Any gain or loss is recognized at commencement and recorded in Net gain (loss) on sale of leasing equipment in the Consolidated Statements of Operations.
Leasing Equipment
The Company purchases new equipment from manufacturers for the purpose of leasing to customers. The Company also purchases used equipment with the intention of selling in one or more years from the date of purchase.
Leasing equipment is recorded at cost and depreciated to a residual amount for each equipment type on a straight-line basis over its estimated useful life. Capitalized costs for new equipment include the manufactured cost of the equipment, inspection, delivery, and associated costs incurred in moving the equipment from the manufacturer to the initial on-hire location. Repair and maintenance costs that do not extend the lives of the leasing equipment are charged to direct operating expenses at the time the costs are incurred.
The estimated useful lives and residual values of the Company's leasing equipment are based on the Company's expectations of how long it will lease the equipment and used container sales prices at the time it expects to sell the equipment. The Company evaluates estimates used in its depreciation policies on a regular basis to determine whether changes, such as industry events, technological advances or changes in standardization for containers have taken place that would suggest that a change in its depreciation estimates for useful lives or residual values is warranted. The Company's evaluation utilizes over fifteen years of historical sales experience for each major equipment type which takes into consideration varying business cycles including unusually high and low markets. Any changes to depreciation estimates are applied prospectively. Due to the size of the depreciable fleet a change in residual values could result in either large increases or decreases to annual depreciation expense depending on the direction of the change in residual values. The Company completed the 2024 annual review of depreciable lives and residual value estimates as of December 31, 2024 and increased useful lives for Dry containers and Refrigerated containers to 15 and 13 years, respectively. In addition, the Company decreased the residual value of Refrigerated containers. These changes will be effective January 1, 2025 on a prospective basis. Based on the equipment fleet as of December 31, 2024, the Company anticipates that these changes in estimate will decrease depreciation expense by approximately $80.0 million in 2025.
The estimated useful life for each major equipment type for the years ended December 31, 2024 and 2023 was 13 years for Dry containers; 12 years for Refrigerated containers; 16 years for Special containers; and 20 years for Tank containers and Chassis.
The net book value of the Company's leasing equipment by major equipment type as of the dates indicated was (in thousands): | | | | | | | | | | | | | | |
| | December 31, 2024 | | December 31, 2023 |
| Dry container | | $ | 7,007,107 | | | $ | 6,926,220 | |
| Refrigerated container | | 1,011,372 | | | 1,182,683 | |
| Special container | | 298,603 | | | 316,062 | |
| Tank container | | 118,572 | | | 122,241 | |
| Chassis | | 203,482 | | | 221,711 | |
| Total | | $ | 8,639,136 | | | $ | 8,768,917 | |
Included in the amounts above are units not on lease at December 31, 2024 and 2023 with a total net book value of $348.9 million and $727.6 million respectively.
Depreciation on leasing equipment commences on the date of initial on-hire.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For equipment purchased for resale that may be leased for a period of time, the Company adjusts its estimates for remaining useful life and residual values based on the Company's expectations for how long the equipment will remain on-hire to the current lessee and the expected sales market for older containers when these units are redelivered.
Valuation of Leasing Equipment
Leasing equipment is evaluated for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying value to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying value of the asset exceeds the fair value of the asset. Key indicators of impairment on leasing equipment include, among other factors, a sustained decrease in operating profitability, a sustained decrease in utilization, or indications of technological obsolescence.
When testing for impairment, leasing equipment is generally grouped by equipment type, and is tested separately from other groups of assets and liabilities. Some of the significant estimates and assumptions used to determine future undiscounted cash flows and the measurement for impairment are the remaining useful life, expected utilization, expected future lease rates and expected disposal prices of the equipment. The Company considers the assumptions on expected utilization and the remaining useful life to have the greatest impact on the estimate of future undiscounted cash flows. These estimates are principally based on the Company's historical experience and management's judgment of market conditions at the time the calculations are prepared.
The Company has not recorded any impairment charges related to leasing equipment for the years ended December 31, 2024, 2023 and 2022.
Equipment Held for Sale
When leasing equipment is returned off lease, the Company makes a determination of whether to repair and re-lease the equipment or sell the equipment. At the time the Company determines that equipment will be sold, it reclassifies the carrying value of leasing equipment to equipment held for sale. Equipment held for sale is recorded at the lower of its estimated fair value less costs to sell, or carrying value at the time identified for sale. Depreciation expense on equipment held for sale is halted and disposals generally occur within 90 days. Initial write downs of equipment held for sale to fair value are recorded as an impairment charge and are included in Net gain (loss) on sale of leasing equipment. Subsequent increases or decreases to the fair value of those assets are recorded as adjustments to the carrying value of the equipment held for sale, however, any such adjustments may not exceed the respective equipment's carrying value at the time it was initially classified as held for sale. Realized gains and losses resulting from the sale of equipment held for sale are recorded in Net gain (loss) on sale of leasing equipment, and cash flows associated with the sale of equipment held for sale are classified as cash flows from investing activities.
Equipment purchased for the Company's equipment trading segment is also included in Equipment held for sale. Gains and losses resulting from the sale of this equipment is recorded in Trading margin, and cash flows associated with the purchase and sale of this equipment are classified as cash flows from operating activities.
Operating Leases
The Company leases office space and office equipment and evaluates whether these leases are classified as operating or financing at the inception of the lease. The classification is based on certain assumptions that require judgment, such as the asset's fair value, the asset's estimated residual value, the interest rate implicit in the lease, and the asset's economic useful life.
For operating leases, the Company records a lease liability based on the present value of the remaining minimum payments and a corresponding right-of-use ("ROU") asset. The Company uses its estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The benefits of lease incentives, including rent-free or reduced rent periods, and the cost of future rent escalations are recognized on a straight-line basis over the term of the lease. A lease liability and a corresponding ROU asset are not recognized when, at the commencement date of the lease, the term is 12 months or less.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property, Furniture and Equipment
Costs of major additions of property, furniture, equipment and improvements are capitalized and are included in Other assets on the Consolidated Balance Sheets. The original cost is depreciated on a straight-line basis over the estimated useful lives of such property, furniture and equipment. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful lives of the leased assets. Other fixed assets, which consist primarily of computer software and hardware as well as leasehold improvements, are recorded at cost and amortized on a straight-line basis over their respective estimated useful lives, which range from three to five years. Expenditures for maintenance and repairs are expensed as they are incurred.
Goodwill
Goodwill is tested for impairment at least annually on October 31 of each fiscal year or more frequently if events occur or circumstances exist that indicate that the fair value of a reporting unit may be below its carrying value. Goodwill has been allocated to the Company's reporting units, which are the same as its reportable segments.
In evaluating goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether further impairment testing is necessary. Among the relevant events and circumstances that affect the fair value of reporting units, the Company considers individual factors such as macroeconomic conditions, changes in its industry and the markets in which the Company operates, as well as its reporting units' historical and expected future financial performance. If, after assessing the totality of events and circumstances, the Company determines it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then a quantitative goodwill impairment test is performed. The quantitative goodwill impairment test compares the fair value of a reporting unit with its carrying value, including goodwill. If the carrying value of the reporting unit is less than its fair value, no impairment exists. If the carrying value of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
The Company elected to perform the qualitative assessment for its evaluation of goodwill impairment during the year ended December 31, 2024 and concluded there was no impairment. The Company has not recorded any impairment charges related to goodwill for the years ended December 31, 2024, 2023, and 2022.
Intangible Assets
Intangible assets with finite useful lives such as acquired lease intangibles are initially recorded at fair value and are amortized over their respective estimated useful lives and subsequently reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company has not recorded any impairment charges related to intangible assets for the years ended December 31, 2024, 2023, and 2022.
Revenue Recognition
Lease Classification
The Company determines the classification of a lease at its inception as either operating leases or finance leases. If the provisions of the lease change after lease inception, other than by renewal or extension, the Company evaluates whether that change may have resulted in a different lease classification had the change been in effect at inception. If so, the revised agreement is considered a new lease for lease classification purposes. The classification of the lease as either an operating lease or finance lease will impact revenue recognition.
Operating Leases with Customers
The Company enters into long-term leases and service leases, principally as lessor in operating leases for intermodal equipment. Long-term leases provide customers with specified equipment for a specified term. The Company's leasing revenues are based upon the number of equipment units leased, the applicable per diem rate and the length of the lease. Long-term leases typically have initial contractual terms ranging from five to eight or more years. Revenues are recognized on a straight-line basis over the life of the respective lease. Revenue from advance billings are deferred and recognized in the period earned. Service leases do not specify the exact number of equipment units to be leased or the term that each unit will remain on-hire, but allow the lessee to pick-up and drop-off units at various locations specified in the lease agreement. Under a service
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
lease, rental revenue is based on the number of equipment units on-hire for a given period. Revenue from customers considered to be non-performing is deferred and recognized when the amounts are received.
The Company recognizes billings to customers for damages and certain other operating costs as leasing revenue when earned based on the terms of the contractual agreements with the customer.
Finance Leases with Customers
The Company enters into finance leases as lessor for some of the equipment in its fleet. At the inception of the lease, the Company records the total future minimum lease payments plus the estimated residual value, net of executory costs, if any, as gross finance lease receivables. Cash deposits reduce the gross finance lease receivable and are recorded on the Consolidated Statements of Cash Flows as deferred revenue within operating activities. The net investment in finance leases represents the receivables due from lessees, net of unearned income and amounts previously billed. As amounts are billed to a customer they are reclassified from gross finance lease receivable to accounts receivable. Unearned income, which also includes any initial direct costs, is recognized on a constant yield basis over the lease term and is recorded as leasing revenue. The Company's finance leases are usually long-term in nature and typically include an option to purchase the equipment at the end of the lease term for a nominal price that the Company deems reasonably certain to be exercised.
Equipment Trading Revenues and Expenses
Equipment trading revenues represent the proceeds from the sale of equipment purchased for resale and are recognized when units are sold. Equipment trading expenses represent the cost of equipment sold including selling costs that are recognized as incurred.
Direct Operating Expenses
Direct operating expenses are directly related to the Company's equipment under and available for lease. These expenses primarily consist of the Company's costs to repair and maintain the equipment, to reposition the equipment and to store the equipment when it is not on lease. These costs are recognized when incurred. Certain positioning costs may be capitalized when incurred to place new equipment on an initial lease.
Debt Costs
Debt costs represent the fees incurred in connection with debt obligation arrangements. These costs are capitalized and amortized based on the effective interest method or on a straight-line basis over the term of the related obligation, depending on the type of debt obligation to which they relate. Unamortized debt costs may be written off when the related debt obligations are refinanced or extinguished prior to maturity. Amounts written off are recorded in Debt termination expense on the Consolidated Statements of Operations.
Derivative Instruments
The Company primarily uses derivatives in the management of its interest rate exposure on its long-term borrowings. The Company records derivative instruments on its balance sheet at fair value and establishes criteria for both the designation and effectiveness of hedging activities.
The Company has entered into interest rate swap agreements with certain financial institutions. The interest rate swap agreements require the Company to make payments to counterparties at fixed rates in return for receipts based upon variable rates indexed to the Secured Overnight Financing Rate ("SOFR").
Derivative instruments are designated or non-designated for hedge accounting purposes. The fair value of the derivative instruments is measured at each balance sheet date and is reflected on a gross basis on the Consolidated Balance Sheets. The change in fair value of the derivative instruments designated as a cash flow hedge are recorded on the Consolidated Balance Sheets in Accumulated other comprehensive income (loss) and are reclassified to interest and debt expense when the hedged interest payments are recognized. The change in fair value of non-designated derivative instruments is recorded in the Consolidated Statements of Operations as Unrealized (gain) loss on derivative instruments, net.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income Taxes
The Company uses the liability method of accounting for income taxes, which requires recognition of deferred tax assets and liabilities based on the expected future tax consequences of temporary differences that currently exist between the tax basis and financial reporting basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any change in the tax rate which has an effect on deferred tax assets and liabilities is recognized as an increase or decrease to income in the period that includes the enactment date of the law that resulted in the change in tax rate.
The Company recognizes the effect of income tax positions which are more-likely-than-not of being sustained. If a position does not meet the more-likely-than-not criteria, the Company records a reserve against the tax position such that a tax benefit is recognized only in the amount that has a greater than 50% likelihood of being recognized. The full impact of any change in recognition or measurement of an uncertain tax position is reflected in the period in which such change occurs. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense.
Foreign Currency Translation and Re-measurement
The Company uses the U.S. dollar as its functional currency. The Company's U.K. subsidiary operations and net assets are denominated in British pounds and are subject to foreign currency translation. The balance sheet accounts of this subsidiary are converted at rates of exchange in effect as of the balance sheet date and the statements of operations accounts are converted at the annual weighted average exchange rate. The effects of changes in exchange rates in translating foreign subsidiaries' financial statements are included in shareholders' equity as accumulated other comprehensive income (loss).
The Company also has certain cash accounts and certain obligations that are denominated in currencies other than the Company's functional currency. These assets and liabilities are generally denominated in euros or British pounds, and are re-measured at each balance sheet date at the exchange rates in effect as of those dates. The impact of changes in exchange rates on the re-measurement of assets and liabilities are included in Administrative expenses on the Consolidated Statements of Operations. The Company recorded a loss of $0.7 million, a gain of $0.4 million and a loss of $2.0 million in net foreign currency exchange gains or losses for the years ended December 31, 2024, 2023 and 2022, respectively.
Recently Adopted Accounting Standards
Segment Reporting
Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), was issued in November 2023, which requires enhancements to the disclosure requirements for operating segments, primarily disclosures about significant segment expenses, in the Company’s annual and interim Consolidated Financial Statements. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. The Company adopted ASU 2023-07 in the fourth quarter of 2024 and this standard impacted the Company's segment footnote disclosure. Refer to Note 12 - "Segment and Geographic Information" for the Company's updated presentation.
Recently Issued Accounting Standards Not Yet Adopted
Income Taxes
ASU No. 2023-09, Improvements to Income Tax Disclosures, was issued in December 2023, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). The new guidance also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual reporting periods beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of this standard will have on its income tax disclosures.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Compensation Costs
ASU No. 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards ("ASU 2024-01"), was issued in March 2024, to clarify the scope application of profits interest and similar awards and to add incremental clarity to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of ASC 718, Compensation-Stock Compensation. ASU 2024-01 is effective for annual periods beginning after December 15, 2024 and interim periods within those annual periods with early adoption permitted. The Company will adopt ASU 2024-01 on January 1, 2025 on a prospective basis, and does not expect the adoption of this ASU to have an impact on the Company’s Consolidated Financial Statements.
Expense Disaggregation Disclosures
ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), was issued in November 2024, which requires disclosure in the notes to the financial statements, of disaggregated information about certain costs and expenses that are included in expense line items on the face of the income statement. The requirements of ASU 2024-03 are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027 with early adoption permitted. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on its Consolidated Financial Statements and disclosures.
Note 3 —Merger
Brookfield Infrastructure Transaction
On September 28, 2023, the Company completed the transactions contemplated by the Agreement and Plan of Merger, dated as of April 11, 2023 (the "Merger Agreement"), by and among the Company, Brookfield Infrastructure Corporation ("BIPC"), Thanos Holdings Limited ("Parent") and Thanos MergerSub Limited, a subsidiary of Parent ("Merger Sub"). Pursuant to the Merger Agreement, Merger Sub merged with and into Triton (the "Merger"), with the Company surviving the Merger as a subsidiary of Parent.
Parent has accounted for the Merger under the acquisition method of accounting with the Company deemed to be the acquiree for accounting purposes. The Company and Parent have elected not to push down purchase accounting adjustments to reflect the assets and liabilities acquired at fair value, and therefore amounts reflected in the financial statements have not been adjusted.
The Company incurred certain costs related to the Merger that are included in Transaction and other costs in the Company’s Consolidated Statements of Operations. For the year ended December 31, 2024, transaction and other costs primarily consisted of employee incentive and retention compensation costs and legal expenses and other costs associated with the Merger. For the year ended December 31, 2023, transaction and other costs primarily consisted of employee incentive and retention compensation costs, financial advisory fees, and legal and professional expenses incurred in connection with the Merger. Refer to Note 10 - "Other Compensation Costs - Other Compensation" for more detailed information regarding employee incentive and retention compensation.
Note 4 —Equipment Held for Sale
The Company's equipment held for sale is recorded at the lower of its estimated fair value less cost to sell, or carrying value at the time identified for sale. Fair value is measured using Level 2 inputs and is based predominantly on recent sales prices. An impairment charge is recorded when the carrying value of the asset exceeds its fair value less cost to sell.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the components of Net gain (loss) on sale of leasing equipment on the Consolidated Statements of Operations (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Impairment (loss) reversal on equipment held for sale | $ | (4,337) | | | $ | (7,144) | | | $ | (887) | |
| Gain (loss) on sale of equipment, net of selling costs | 74,114 | | | 65,759 | | | 116,552 | |
| Up-front (loss) on finance lease | (57,408) | | | — | | | — | |
| Net gain (loss) on sale of leasing equipment | $ | 12,369 | | | $ | 58,615 | | | $ | 115,665 | |
During 2024, the Company entered into a finance lease transaction which included certain containers purchased during the COVID-19 pandemic with carrying values that were higher than current market values, resulting in an up-front loss of $57.4 million and corresponding reduction to the net book value of revenue earning assets.
Note 5—Intangible Assets
Intangible assets consist of lease intangibles for leases acquired with lease rates above market in a business combination. As of December 31, 2024, the Company's intangible assets were fully amortized.
Amortization expense related to intangible assets was $2.0 million, $4.7 million, and $10.5 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Note 6—Restricted Cash
The components of restricted cash were as follows for the periods ended (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Collection accounts | $ | 43,187 | | | $ | 29,447 | |
| Trust accounts | 18,700 | | | 18,932 | |
| Other restricted cash | 49,602 | | | 43,071 | |
| Total restricted cash | $ | 111,489 | | | $ | 91,450 | |
Collection accounts
The Company maintains bank accounts for collections related to its containers that are financed ("the Collection Accounts"). Cash proceeds collected from leasing and disposition are deposited into the Collection Accounts and all expenses related to the operation of the containers are paid from the Collection Accounts. The Company considers the portion of the balance in the Collection Accounts to be transferred to separate trust accounts for the benefit of asset-backed securitization ("ABS") noteholders as restricted and the portion of the balance attributable to containers that are unsecured as unrestricted.
Trust accounts
Pursuant to certain debt agreements, cash is transferred from the Collection Accounts to separate accounts (the "Trust Accounts"). The Trust Accounts are maintained by an indenture trustee on behalf of certain ABS noteholders. The cash in the Trust Accounts is used to pay related ABS debt service and related expenses. Interest income earned on restricted cash is recorded in Interest and debt expense on the Consolidated Statements of Operations. Any remaining cash in these accounts is transferred to certain unrestricted bank accounts of the Company and is included in Cash and cash equivalents on the Consolidated Balance Sheets.
Other restricted cash
Pursuant to certain secured debt financings, cash is held in separate accounts to maintain an amount equal to projected interest expense for a specified number of months.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other restricted cash at December 31, 2024 includes $13.4 million of cash received in December 2024 related to a settlement of claims from a customer bankruptcy in 2016 that the Company is required to remit to a third-party per the terms of a separate credit insurance agreement.
Note 7—Debt
The table below summarizes the Company's key terms and carrying value of debt as of the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Outstanding Borrowings (in thousands) | | Contractual Weighted Avg Interest Rate | | Maturity Range | | Outstanding Borrowings (in thousands) |
| | | From | | To | |
| | | | | | | | | |
| Secured Debt Financings | | | | | | | | | |
| Asset-backed securitization term notes | $ | 3,032,700 | | | 2.93 | % | | February 2028 | | February 2035 | | $ | 2,579,832 | |
| Asset-backed securitization warehouse | 60,000 | | | 6.16 | % | | January 2031 | | January 2031 | | 240,000 | |
| | | | | | | | | |
| Total secured debt financings | 3,092,700 | | | | | | | | | 2,819,832 | |
| Unsecured Debt Financings | | | | | | | | | |
| Senior notes | 1,800,000 | | | 2.82 | % | | April 2026 | | March 2032 | | 2,300,000 | |
| Credit facility: | | | | | | | | | |
| Revolving credit tranche | 1,085,000 | | | 5.76 | % | | July 2029 | | July 2029 | | 930,000 | |
| Term loan tranche | 1,680,000 | | | 5.76 | % | | July 2029 | | July 2029 | | 1,468,496 | |
| Total unsecured debt financings | 4,565,000 | | | | | | | | | 4,698,496 | |
| Total debt financings | $ | 7,657,700 | | | | | | | | | $ | 7,518,328 | |
| Unamortized debt costs | (48,743) | | | | | | | | | (43,924) | |
| Unamortized debt premium & discounts | (3,237) | | | | | | | | | (3,770) | |
| | | | | | | | | |
| Debt, net of unamortized costs | $ | 7,605,720 | | | | | | | | | $ | 7,470,634 | |
Securitization Term Instruments
Under the Company's ABS facilities, indirect wholly owned subsidiaries of the Company enter into debt agreements for ABS term instruments, including ABS notes. These subsidiaries are intended to be bankruptcy remote so that such assets are not available to creditors of the Company or its affiliates until and unless the related secured borrowings have been fully discharged. These transactions do not meet accounting requirements for sales treatment and are recorded as secured borrowings.
The Company’s borrowings under the ABS facilities amortize in monthly installments, typically in level payments over five or more years. These facilities provide for an advance rate against the net book values of designated eligible equipment. The net book values for purposes of calculating eligible equipment is determined according to the related debt agreement and may be different than those calculated per GAAP. The Company is required to maintain restricted cash balances on deposit in designated bank accounts equal to nine months of interest expense on certain securitized term instruments.
In the second and third quarters of 2024, the Company issued a series of ABS fixed-rate notes in the amounts of $450.0 million and $351.9 million at weighted average interest rates of 5.55% and 5.63% and expected maturity dates of May 2034 and February 2035, respectively. The proceeds from these issuances were primarily used to pay down borrowings under the Company's revolving credit facilities.
In the first quarter of 2024, the Company obtained $57.0 million in irrevocable standby letters of credit to satisfy the restricted cash balance requirements equal to nine months of interest expense on the ABS facilities, inclusive of a $18.7 million irrevocable standby letter of credit related to the ABS fixed-rate notes issued in the second quarter of 2024. The restricted cash balance held by the indenture trustee in designated bank accounts of $38.3 million was released to the Company subsequent to the issuance of the letters of credit.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In the fourth quarter of 2024, in connection with the TCF VIII Distribution (as defined in Note 16 - "Related Party Transactions"), the Company cancelled the related TCF VIII standby letters of credit and funded restricted cash to be held by the indenture trustee in the amount of $21.3 million in order to satisfy the restricted cash balance requirements equal to nine months of interest expense on the TCF VIII ABS facility. As of December 31, 2024, the current value of the remaining standby letters of credit for the Company's ABS facilities, as amended, is $31.9 million. Refer to Note 16 - "Related Party Transactions" for additional details regarding the TCF VIII Distribution.
Asset-Backed Securitization Warehouse
Under the Company’s ABS warehouse facility, an indirect wholly owned subsidiary of the Company issues ABS notes. This subsidiary is intended to be bankruptcy remote so that such assets are not available to creditors of the Company or its affiliates until and unless the related secured borrowings have been fully discharged. These transactions do not meet accounting requirements for sales treatment and are recorded as secured borrowings.
The Company's ABS warehouse facility has a borrowing capacity of $1,125.0 million that is available on a revolving basis, paying interest at term SOFR plus 1.60%. In the first quarter of 2024, the Company amended its ABS warehouse facility to extend the conversion date from April 27, 2025 to January 22, 2027. After the revolving period, borrowings will convert to term notes with a final maturity date of January 22, 2031 and pay interest at daily compound SOFR plus 2.60%. The interest rate benchmark was amended from term SOFR to daily compounded SOFR. The margin over the benchmark rate was unchanged as a result of the amendment.
During the revolving period, the borrowing capacity under this facility is determined by applying an advance rate against the net book values of designated eligible equipment. The net book values for purposes of calculating eligible equipment are determined according to the related debt agreement and may be different than those calculated per GAAP. The Company is required to maintain restricted cash balances on deposit in designated bank accounts equal to three months of interest expense.
Senior Notes
The Company’s senior notes are unsecured and have initial maturities ranging from five to ten years and interest payments due semi-annually. The senior notes are prepayable (in whole or in part) at the Company's option at any time prior to the maturity date, subject to certain provisions in the senior note agreements, including the payment of a make-whole premium in respect to such prepayment.
In the second quarter of 2024, the Company’s $500.0 million 1.15% senior notes matured. Payment at maturity was primarily funded by borrowings under Triton’s revolving credit facility.
Credit Facility
In the third quarter of 2024, the Company amended and restated its existing $2,000.0 million revolving credit facility to add a new $1,750.0 million term loan tranche under the credit facility. Term loan borrowings under the credit facility amortize in quarterly installments. The amendment and restatement also transitioned the reference rate from term to daily SOFR, increased the accordion feature available under the credit facility from $500.0 million to $1,000.0 million (or more in certain instances) and extended the maturity date of the credit facility to July 9, 2029. The interest rate under the credit facility is daily SOFR plus 1.30%. The credit facility is subject to covenants customary for financings of this type, including financial covenants that require the Company to maintain a minimum ratio of unencumbered assets to certain financial indebtedness.
In conjunction with the addition of the term loan tranche under the credit facility, the Company terminated the former term loan credit facility. These transactions were accounted for as a debt modification and, accordingly, financing fees paid were deferred and $0.1 million of the unamortized fees from the former term loan facility were written off and included in Debt termination expense on the Consolidated Statements of Operations.
Derivative Impact on Debt
The Company hedges the risks associated with fluctuations in interest rates on a portion of its floating-rate debt by entering into interest rate swap agreements that convert a portion of its floating-rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the Company's outstanding fixed-rate and floating-rate debt as of December 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance Outstanding (in thousands) | | Contractual Weighted Avg Interest Rate | | Maturity Range | | Weighted Avg Remaining Term |
| | | From | | To | |
| Excluding impact of derivative instruments: | | | | | | | | | |
| Fixed-rate debt | $ | 4,832,700 | | | 2.89% | | Apr 2026 | | Feb 2035 | | 4.2 years |
| Floating-rate debt | $ | 2,825,000 | | | 5.77% | | Jul 2029 | | Jan 2031 | | 4.1 years |
| | | | | | | | | |
| Including impact of derivative instruments: | | | | | | | | | |
| Fixed-rate debt | $ | 4,832,700 | | | 2.89% | | | | | | |
| Hedged floating rate debt | 1,866,250 | | | 3.84% | | | | | | |
| Total fixed and hedged floating-rate debt | 6,698,950 | | | 3.15% | | | | | | |
| Unhedged floating rate debt | 958,750 | | | 5.77% | | | | | | |
| Total debt outstanding | $ | 7,657,700 | | | 3.46% | | | | | | |
The fair value of total debt outstanding was $7,241.7 million and $6,905.9 million as of December 31, 2024 and December 31, 2023, respectively, and was measured using Level 1 and Level 2 inputs.
As of December 31, 2024, the maximum borrowing levels for the ABS warehouse and the revolving credit tranche under the credit facility were $1,125.0 million and $2,000.0 million, respectively. These facilities are governed by either borrowing bases or an unencumbered asset test that limits borrowing capacity. Based on those limitations, the availability under these revolving credit facilities at December 31, 2024 was approximately $827.0 million.
The Company is subject to certain financial covenants under its debt financings. As of December 31, 2024, the Company was in compliance with all financial covenants in accordance with the terms of its debt agreements.
Debt Maturities
At December 31, 2024, the Company's scheduled principal repayments and maturities were as follows (in thousands):
| | | | | |
| Years ending December 31, | |
| 2025 | $ | 511,937 | |
| 2026 | 1,114,080 | |
| 2027 | 572,058 | |
| 2028 | 776,614 | |
| 2029 | 2,739,848 | |
| 2030 and thereafter | 1,943,163 | |
| Total debt outstanding | $ | 7,657,700 | |
Note 8—Derivative Instruments
Interest Rate Swaps / Caps
The Company enters into derivative agreements to manage interest rate risk exposure. Interest rate swap agreements are utilized to limit the Company's exposure to interest rate risk by converting a portion of its floating-rate debt to a fixed-rate basis, thus reducing the impact of interest rate changes on future interest expense. Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the lives of the agreements without an exchange of the underlying principal amounts. These swaps are designated as cash flow hedges for accounting purposes and accordingly, changes in the fair value are recorded in Accumulated other comprehensive income (loss) and are reclassified to interest and debt expense when the hedged interest payments are recognized.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In the first quarter of 2024, the Company entered into offsetting $500.0 million notional interest rate cap agreements with substantially similar economic terms related to certain debt facility requirements. These derivatives are not designated as hedging instruments, and because they offset, changes in fair value have an immaterial impact on the Consolidated Statements of Operations.
The counterparties to these agreements are highly rated financial institutions. In the unlikely event that the counterparties fail to meet the terms of these agreements, the Company's exposure is limited to the interest rate differential on the notional amount at each monthly settlement period over the life of the agreements. The Company does not anticipate any non-performance by the counterparties.
Certain assets of the Company's subsidiaries are pledged as collateral for various ABS facilities. Additionally, the Company may be required to post cash collateral on certain derivative agreements if the fair value of these contracts represents a liability. Any amounts of cash collateral posted are included in Other assets on the Consolidated Balance Sheets and are presented in operating activities on the Consolidated Statements of Cash Flows. As of December 31, 2024, the Company had cash collateral on derivative instruments of $0.7 million.
Within the next twelve months, the Company expects to reclassify $27.4 million of net unrealized and realized gains related to derivative instruments designated as cash flow hedges from accumulated other comprehensive income (loss) into earnings.
As of December 31, 2024, the Company had derivative agreements in place to fix interest rates on a portion of the borrowings under its debt facilities with floating interest rates as summarized below:
| | | | | | | | | | | | | | | | | | | | | | |
| Derivatives | | Notional Amount (in millions) | | Weighted Average
Fixed Leg (Pay) Interest Rate | | | | Weighted Average
Remaining Term |
| Interest Rate Swap | | $1,866.3 | | 2.54% | | | | 3.6 years |
| | | | | | | | |
The following table summarizes the impact of derivative instruments on the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income on a pretax basis (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, |
| Financial statement caption | | 2024 | | 2023 | | 2022 | |
| Non-Designated Derivative Instruments | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Unrealized (gains) losses | Unrealized (gain) loss on derivative instruments, net | | $ | 40 | | | $ | (15) | | | $ | (343) | | |
| Designated Derivative Instruments | | | | | | | | |
| Realized (gains) losses | Interest and debt (income) expense | | $ | (50,795) | | | $ | (47,648) | | | $ | 260 | | |
| Unrealized (gains) losses | Comprehensive (income) loss | | $ | (55,913) | | | $ | (20,148) | | | $ | (168,156) | | |
| | | | | | | | |
| | | | | | | | |
Fair Value of Derivative Instruments
The Company presents the fair value of derivative instruments on a gross basis as a separate line item on the Consolidated Balance Sheets.
The Company has elected to use the income approach to value its interest rate swap and cap agreements, using Level 2 market expectations at the measurement date and standard valuation techniques to convert future values to a single discounted present value. The Level 2 inputs for the interest rate swap and cap valuations are inputs other than quoted prices that are observable for the asset or liability (specifically SOFR and swap rates and credit risk at commonly quoted intervals).
Note 9—Leases
Lessee
The Company's leases office facilities under various cancellable and non-cancellable operating leases, most of which provide extension or early termination options. The Company's lease agreements do not contain any residual value guarantees or material restrictive covenants.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the impact of the Company's leases in its financial statements (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Balance Sheet | | Financial statement caption | | | | December 31, 2024 | | December 31, 2023 |
| Right-of-use asset - operating | | Other assets | | $ | 10,645 | | | $ | 10,093 | |
| Lease liability - operating | | Accounts payable and other accrued expenses | | $ | 14,331 | | | $ | 13,510 | |
| | | | | | | | |
| | | | Year Ended December 31, |
| Income Statement | | Financial statement caption | | 2024 | | 2023 | | 2022 |
Operating lease cost(1) | | Administrative expenses | | $ | 2,968 | | | $ | 2,869 | | | $ | 3,205 | |
(1) Includes short-term leases that are immaterial.
Cash paid for amounts included in the measurement of lease liabilities included in operating cash flows was $2.5 million, $2.9 million, and $3.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The following represents the Company's future undiscounted cash flows related to lease liabilities for each of the next five years and thereafter as of December 31, 2024 (in thousands):
| | | | | |
| |
| |
| Years ending December 31, | |
| 2025 | $ | 2,936 | |
| 2026 | 2,413 | |
| 2027 | 1,975 | |
| 2028 | 1,713 | |
| 2029 | 1,581 | |
| 2030 and thereafter | 7,595 | |
| Total undiscounted future cash flows related to lease payments | $ | 18,213 | |
| Less: imputed interest | (3,882) | |
| Total present value of lease liability | $ | 14,331 | |
| |
| |
The following table includes supplemental information related to the Company's operating leases:
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Weighted-Average Remaining Lease Term | 8.5 years | | 9.5 years |
| Weighted-Average Discount Rate | 5.67 | % | | 5.67 | % |
Lessor
Operating Leases
The following is the minimum future rental income as of December 31, 2024 under non-cancelable operating leases, assuming the minimum contractual lease term (in thousands):
| | | | | |
| Years ending December 31, | |
| 2025 | $ | 949,398 | |
| 2026 | 777,437 | |
| 2027 | 639,232 | |
| 2028 | 542,814 | |
| 2029 | 397,239 | |
| 2030 and thereafter | 950,413 | |
| Total | $ | 4,256,533 | |
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2024, the Company has deferred revenue balances related to operating leases with uneven payment terms. These amounts will be amortized into revenue as follows (in thousands):
| | | | | |
| Years ending December 31, | |
| 2025 | $ | 65,984 | |
| 2026 | 43,225 | |
| 2027 | 16,725 | |
| 2028 | 15,568 | |
| 2029 | 13,877 | |
| 2030 and thereafter | 29,381 | |
| Total | $ | 184,760 | |
Finance Leases
The following table summarizes the components of the net investment in finance leases (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
Future minimum lease payment receivable(1) | $ | 1,989,859 | | | $ | 1,928,167 | |
Estimated residual receivable(2) | 269,090 | | | 218,199 | |
| | | |
Gross finance lease receivables(3) | 2,258,949 | | | 2,146,366 | |
Unearned income(4) | (673,137) | | | (636,486) | |
Finance lease reserve(5) | — | | | (2,588) | |
Net investment in finance leases(6) | $ | 1,585,812 | | | $ | 1,507,292 | |
(1) There were no executory costs included in gross finance lease receivables as of December 31, 2024 and December 31, 2023.
(2) The Company's finance leases generally include a purchase option at nominal amounts that is reasonably certain to be exercised, and therefore, the Company has immaterial residual value risk for assets.
(3) The gross finance lease receivable is reduced as billed to customers and reclassified to accounts receivable until paid by customers.
(4) There were no unamortized initial direct costs as of December 31, 2024 and December 31, 2023.
(5) The Company reversed the finance lease reserve during the second quarter of 2024.
(6) One major customer represented 93% of the Company's finance lease portfolio as of December 31, 2024 and 2023. No other customer represented more than 10% of the Company's finance lease portfolio in each of those periods.
Maturities of the Company's gross finance lease receivables subsequent to December 31, 2024 are as follows (in thousands):
| | | | | |
| Years ending December 31, | |
| 2025 | $ | 231,432 | |
| 2026 | 220,064 | |
| 2027 | 194,218 | |
| 2028 | 187,853 | |
| 2029 | 185,641 | |
| 2030 and thereafter | 1,239,741 | |
| Total | $ | 2,258,949 | |
The Company’s finance lease portfolio customers are primarily large international shipping lines. In its estimate of expected credit losses, the Company evaluates the overall credit quality of its finance lease portfolio. The Company considers an account past due when a payment has not been received in accordance with the terms of the related lease agreement and maintains allowances, if necessary, for doubtful accounts. These allowances are based on, but not limited to, historical experience which includes stronger and weaker economic cycles, each lessee's payment history, management's current assessment of each lessee's financial condition, consideration of current economic conditions and reasonable market forecasts.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10—Other Compensation Costs
Long-Term Cash Incentive Plan
The Company adopted a Long-Term Cash Incentive Plan that allows incentive awards to be granted to certain employees and consultants of the Company. The Company granted 2024 long-term cash incentive awards with a specified cash target value ("2024 LTIP Awards") during the first quarter of 2024. The 2024 LTIP Awards will vest in equal installments on January 15, 2026 and January 15, 2027, subject to the participant's continued service with the Company. Payouts of the awards will be based on changes in the Company’s valuation, plus cumulative cash dividends and return of capital distributions paid by the Company over the vesting period. Changes in the aggregate target value at each subsequent reporting date will be recognized as compensation expense based on the portion of vesting or service period lapsed from the grant date through the reporting date.
The aggregate target value of the 2024 LTIP Awards at December 31, 2024 was $13.8 million, which will be recognized as compensation expense over the vesting period. For the year ended December 31, 2024, the Company recognized $4.6 million of compensation expense for the 2024 LTIP Awards in Administrative expenses on the Consolidated Statements of Operations.
Long-Term Incentive Awards
In the fourth quarter of 2023, certain senior executives of the Company were granted 750 incentive units pursuant to a long-term incentive program established by Brookfield Infrastructure. The awards (the "Incentive Units") will vest in five equal annual installments on each of the first five anniversaries of the closing date of the Merger, subject to the participants' continued employment or service. During the second quarter of 2024, 125 additional Incentive Units were granted under this program in the form of bonus unit awards. The total number of Incentive Units granted under the long-term incentive program was 875 as of December 31, 2024. Payment obligations under the program (if any) are the responsibility of Brookfield Infrastructure. For additional information regarding the Incentive Units, refer to Item 6.B, "Compensation" section "Long-Term Incentive Unit Awards" in this Annual Report.
The Company will recognize compensation cost for the Incentive Units on a straight-line basis over the five-year vesting period based on the fair value of the awards. The fair value at grant date of $16.4 million relates to both units issued and additional units that are expected to be issued under this program. Changes in the fair value at each subsequent reporting date will be recognized as compensation expense based on the portion of vesting or service period lapsed from the grant date through the reporting date. Based on a review of the valuation of the Company at the first anniversary date of the Merger, the fair value of these awards at December 31, 2024 is $19.2 million. The fair value as of December 31, 2024 was calculated using a Black-Scholes pricing formula including the following significant assumptions:
| | | | | |
| |
| Underlying market price per share | $117 |
| Volatility | 34.00 | % |
| Expected term | 4 years |
| Risk-free rate | 3.58 | % |
For the year ended December 31, 2024, the Company recognized $3.8 million of compensation expense for the Incentive Units in Administrative expenses on the Consolidated Statements of Operations and recorded the payment obligations as Contributed capital from Parent on the Consolidated Statements of Shareholders’ Equity.
Other Compensation
Prior to the completion of the Merger, the Company recognized share-based compensation expense for share-based awards based on the grant date fair value. The expense was recognized over the employee's requisite service period, or vesting period of the equity award, approximately three years. The Company recognized share-based compensation expense in Administrative expenses on the Consolidated Statements of Operations of $7.3 million and $12.5 million for the years ended December 31, 2023 and 2022, respectively.
In accordance with the Merger Agreement, upon closing of the Merger, Triton’s unvested restricted shares and restricted share units that were outstanding immediately prior to the closing of the Merger were converted into a contingent right to
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
receive cash equal to the number of shares subject to such award, assuming attainment of the maximum level of performance for performance-based awards, multiplied by $83.16 per share, plus accrued dividends. Payment is at the earlier of the original vesting date of the award and the twelve month anniversary of the Merger closing date subject to the participant's continued service with the Company. The modification of the unvested share-based awards changed the classification of the awards from equity to liability, as well as modified the original service period of the awards. As a result of the change in the classification of the awards, the Company reclassified $16.1 million from equity, plus previously accrued dividends of $2.9 million to the accrued compensation liability. Further, for the year ended December 31, 2023, the Company recorded $24.2 million in share-based compensation expense as a result of the modification to recognize the fair value of the awards based on the portion of the service period completed through December 31, 2023. This amount is included in Transaction and other costs in the Consolidated Statements of Operations. For the year ended December 31, 2024, Transaction and other costs includes $11.9 million in incremental employee compensation costs to recognize the fair value of the awards over the remaining vesting period.
As of December 31, 2024, in accordance with the terms of the Merger Agreement, awards of $55.1 million have been paid in cash.
Transaction and other costs also included retention compensation expense related to the Merger of $2.2 million for both the years ended December 31, 2024 and 2023. The accrued retention liability of $4.4 million was paid in full in the third quarter of 2024. Refer to Note 3 - "Merger" for more detailed information regarding Merger costs.
Note 11—Other Equity Matters
In connection with the Merger, all previously issued and outstanding common shares of Triton were cancelled and following the closing of the Merger, 100% of the Company’s issued and outstanding common shares are privately held by a subsidiary of Brookfield Infrastructure, therefore, earnings per share data is not presented.
During the year ended December 31, 2024, the Company paid cash dividends of $600.0 million to Parent. The Company also paid $5.5 million in cash distributions to Parent for the reimbursement of or payment of costs primarily related to the Merger. In addition, the Company received a capital contribution of $1.9 million from a Brookfield affiliate in connection with the Merger that was distributed as a dividend to Parent.
Preference Shares
Triton’s preference shares are listed on the New York Stock Exchange.
The following table summarizes the Company's preference share issuances as of December 31, 2024 (each, a "Series"):
| | | | | | | | | | | | | | | | | | | | | | | | |
| Preference Share Series | | Issuance | | | Liquidation Preference (in thousands) | | # of Shares(1) | |
Series A 8.50% Cumulative Redeemable Perpetual Preference Shares ("Series A") | | March 2019 | | | $ | 86,250 | | | 3,450,000 | | |
Series B 8.00% Cumulative Redeemable Perpetual Preference Shares ("Series B") | | June 2019 | | | 143,750 | | | 5,750,000 | | |
Series C 7.375% Cumulative Redeemable Perpetual Preference Shares ("Series C") | | November 2019 | | | 175,000 | | | 7,000,000 | | |
Series D 6.875% Cumulative Redeemable Perpetual Preference Shares ("Series D") | | January 2020 | | | 150,000 | | | 6,000,000 | | |
Series E 5.75% Cumulative Redeemable Perpetual Preference Shares ("Series E") | | August 2021 | | | 175,000 | | | 7,000,000 | | |
| | | | | $ | 730,000 | | | 29,200,000 | | |
(1) Represents number of shares authorized, issued, and outstanding.
Each Series of preference shares may be redeemed at the Company's option, at any time after approximately five years from original issuance, in whole or in part at a redemption price, plus an amount equal to all accumulated and unpaid dividends, whether or not declared. The Company may also redeem each Series of preference shares prior to the lapse of the five year
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
period upon the occurrence of certain events as described in each instrument, such as transactions that either transfer ownership of substantially all assets to a single entity or establish a majority voting interest by a single entity, and cause a downgrade or withdrawal of rating by the rating agency within 60 days of the event. If the Company does not elect to redeem each Series upon the occurrence of the preceding events, holders of preference shares may have the right to convert their preference shares into common shares. Specifically for Series E only, the Company may redeem the Series E Preference Shares if an applicable rating agency changes the methodology or criteria that were employed in assigning equity credit to securities similar to the Series E Preference Shares when originally issued, which either (a) shortens the period of time during which equity credit pertaining to the Series E Preference Shares would have been in effect had the methodology not been changed or (b) reduces the amount of equity credit as compared with the amount of equity credit that the rating agency had assigned to the Series E Preference Shares when originally issued.
Holders of preference shares generally have no voting rights. If the Company fails to pay dividends for six or more quarterly periods (whether or not consecutive), holders will be entitled to elect two additional directors to the Board of Directors and the size of the Board of Directors will be increased to accommodate such election. Such right to elect two directors will continue until such time as there are no accumulated and unpaid dividends in arrears.
Dividends
Dividends on shares of each Preference Series are cumulative from the date of original issue and will be payable quarterly in arrears on the 15th day of March, June, September and December of each year, when, as and if declared by the Company's Board of Directors. Dividends will be payable equal to the stated rate per annum of the $25.00 liquidation preference per share. The Series rank senior to the Company's common shares with respect to dividend rights and rights upon the Company's liquidation, dissolution or winding up, whether voluntary or involuntary.
The Company paid the following quarterly dividends on its issued and outstanding Series (in millions except for the per-share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, |
| | | 2024 | | 2023 | | 2022 |
| Series | | | Per Share Payment | | Aggregate Payment | | Per Share Payment | | Aggregate Payment | | Per Share Payment | | Aggregate Payment |
A(1) | | | $2.12 | | $ | 7.2 | | | $2.12 | | $ | 7.2 | | | $2.12 | | $ | 7.2 | |
| B | | | $2.00 | | $ | 11.6 | | | $2.00 | | $ | 11.6 | | | $2.00 | | $ | 11.6 | |
C(1) | | | $1.84 | | $ | 12.8 | | | $1.84 | | $ | 12.8 | | | $1.84 | | $ | 12.8 | |
D(1) | | | $1.72 | | $ | 10.4 | | | $1.72 | | $ | 10.4 | | | $1.72 | | $ | 10.4 | |
E(1) | | | $1.44 | | $ | 10.1 | | | $1.44 | | $ | 10.1 | | | $1.44 | | $ | 10.1 | |
| Total | | | | | $ | 52.1 | | | | | $ | 52.1 | | | | | $ | 52.1 | |
(1) Per share payments rounded to the nearest whole cent.
As of December 31, 2024, the Company had cumulative unpaid preference dividends of $2.2 million.
Note 12—Segment and Geographic Information
Segment Information
The Company operates its business in one industry, intermodal transportation equipment, and has two operating segments which also represent its reportable segments:
•Equipment leasing - the Company owns, leases and ultimately disposes of containers and chassis from its lease fleet.
•Equipment trading - the Company purchases containers from shipping line customers, and other sellers of containers, and resells these containers to container retailers and users of containers for storage or one-way shipment. Included in the equipment trading segment revenues are leasing revenues from equipment purchased for resale that is currently on lease until the containers are dropped off.
These operating segments were determined based on the chief operating decision maker's review and resource allocation of the products and services offered. The Company’s Chief Operating Decision Maker(s) ("CODM") is the Senior executive team.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Most of Triton’s revenues are derived from leasing equipment to the Company's core shipping line customers. The most important driver of profitability is the extent to which leasing revenues, which are driven by the Company's owned equipment fleet size, utilization and average lease rates, exceed ownership (depreciation and interest expense) and operating costs. The Company's profitability is also driven by the gains or losses realized on the sale of used containers and the margins generated from trading new and used containers. The CODM uses leasing margin and disposal gains in the Company's equipment leasing segment and net trading margin in the equipment trading segment as the primary measures of profitability and the basis for the allocation of resources. Within the components of leasing margin the CODM will analyze the relationship between revenue trends and certain significant expenses including storage and handling and repair costs. The Company adopted ASU 2023-07 in December of 2024 on a retrospective basis.
The following tables summarizes the Company's segment information and the consolidated totals reported (in thousands):
| | | | | | | | | | | | | | | | | |
| As of and for the Year Ended December 31, 2024 | Equipment Leasing | | Equipment Trading | | Totals |
| Total leasing revenues | $ | 1,527,035 | | | $ | 7,801 | | | $ | 1,534,836 | |
| Less: | | | | | |
| Depreciation and amortization | 540,646 | | | 822 | | | 541,468 | |
| Interest and debt expense | 259,236 | | | 705 | | | 259,941 | |
| | | | | |
| Storage and handling | 51,765 | | | — | | | 51,765 | |
| Repair costs | 9,045 | | | — | | | 9,045 | |
| Other operating expenses | 5,579 | | | — | | | 5,579 | |
Administrative expenses(1) | 90,130 | | | 1,071 | | | 91,201 | |
Other (income)expenses(2) | (1,609) | | | — | | | (1,609) | |
| | | | | |
| Leasing margin | $ | 572,243 | | | $ | 5,203 | | | $ | 577,446 | |
| Net trading margin | — | | | 4,296 | | | 4,296 | |
| Net gain (loss) on sale of leasing equipment | 12,369 | | | — | | | 12,369 | |
| | | | | |
| | | | | |
| Transaction and other costs | | | | | (26,986) | |
Other costs (income)(3) | | | | | (127) | |
| Income (loss) before income taxes | | | | | $ | 566,998 | |
| | | | | |
| Total assets | 11,038,251 | | | 65,152 | | | 11,103,403 | |
Purchases of leasing equipment and investments in finance leases(4) | $ | 929,449 | | | $ | — | | | $ | 929,449 | |
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| As of and for the Year Ended December 31, 2023 | Equipment Leasing | | Equipment Trading | | Totals |
| Total leasing revenues | $ | 1,537,351 | | | $ | 6,441 | | | $ | 1,543,792 | |
| Less: | | | | | |
| Depreciation and amortization | 574,767 | | | 784 | | | 575,551 | |
| Interest and debt expense | 239,844 | | | 994 | | | 240,838 | |
| | | | | |
| Storage and handling | 78,608 | | | — | | | 78,608 | |
| Repair costs | 14,811 | | | — | | | 14,811 | |
| Other operating expenses | 8,133 | | | — | | | 8,133 | |
Administrative expenses(1) | 86,774 | | | 2,065 | | | 88,839 | |
Other (income)expenses(2) | (4,012) | | | — | | | (4,012) | |
| | | | | |
| Leasing margin | $ | 538,426 | | | $ | 2,598 | | | $ | 541,024 | |
| Net trading margin | — | | | 7,899 | | | 7,899 | |
| Net gain (loss) on sale of leasing equipment | 58,615 | | | — | | | 58,615 | |
| | | | | |
| | | | | |
| Transaction and other costs | | | | | (79,000) | |
Other costs (income)(3) | | | | | 15 | |
| Income (loss) before income taxes | | | | | $ | 528,553 | |
| | | | | |
| Total assets | 11,164,052 | | | 68,816 | | | 11,232,868 | |
Purchases of leasing equipment and investments in finance leases(4) | $ | 208,242 | | | $ | — | | | $ | 208,242 | |
| | | | | | | | | | | | | | | | | |
| As of and for the Year Ended December 31, 2022 | Equipment Leasing | | Equipment Trading | | Totals |
| Total leasing revenues | $ | 1,665,880 | | | $ | 13,806 | | | $ | 1,679,686 | |
| Less: | | | | | |
| Depreciation and amortization | 634,090 | | | 747 | | | 634,837 | |
| Interest and debt expense | 224,470 | | | 1,621 | | | 226,091 | |
| | | | | |
| Storage and handling | 22,990 | | | — | | | 22,990 | |
| Repair costs | 13,485 | | | — | | | 13,485 | |
| Other operating expenses | 5,906 | | | — | | | 5,906 | |
Administrative expenses(1) | 91,091 | | | 1,920 | | | 93,011 | |
Other (income)expenses(2) | (4,284) | | | — | | | (4,284) | |
| | | | | |
| Leasing margin | $ | 678,132 | | | $ | 9,518 | | | $ | 687,650 | |
| Net trading margin | — | | | 16,004 | | | 16,004 | |
| Net gain (loss) on sale of leasing equipment | 115,665 | | | — | | | 115,665 | |
| | | | | |
| | | | | |
| Transaction and other costs | — | | | — | | | — | |
Other costs (income)(3) | | | | | (1,590) | |
| Income (loss) before income taxes | | | | | $ | 817,729 | |
| | | | | |
| Total assets | 12,010,654 | | | 98,604 | | | 12,109,258 | |
Purchases of leasing equipment and investments in finance leases(4) | $ | 943,062 | | | $ | — | | | $ | 943,062 | |
(1) Certain Administrative expenses have been allocated to the equipment trading segment based on a methodology that is consistent in all the periods presented.
(2) Other segment items primarily include the provision (reversal) for doubtful accounts.
(3) Other non-allocated costs (income) include unrealized gains or losses on derivative instruments and debt termination expense.
(4) Represents cash disbursements for purchases of leasing equipment and investments in finance leases as reflected in the Consolidated Statements of Cash Flows for the periods indicated, but excludes cash flows associated with the purchase of equipment held for resale.
There are no intercompany revenues or expenses between segments. Certain administrative expenses have been allocated between segments based on an estimate of services provided to each segment. A portion of the Company's equipment purchased for resale in the equipment trading segment may be leased for a period of time and is reflected as leasing equipment as opposed to equipment held for sale and the cash flows associated with these transactions are reflected as purchases of leasing equipment and proceeds from the sale of equipment in investing activities in the Company's Consolidated Statements of Cash Flows.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Geographic Segment Information
The Company generates the majority of its leasing revenues from international containers which are deployed by its customers in a wide variety of global trade routes. The majority of the Company's leasing related revenue is denominated in U.S. dollars.
The following table summarizes the geographic allocation of total leasing revenues based on customers' primary domicile (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2024 | | 2023 | | 2022 |
| Total leasing revenues: | | | | | |
| Asia | $ | 559,938 | | | $ | 529,150 | | | $ | 602,985 | |
| Europe | 820,633 | | | 822,902 | | | 876,691 | |
| Americas | 89,075 | | | 132,930 | | | 142,822 | |
| Bermuda | 4,335 | | | 4,203 | | | 3,135 | |
| Other International | 60,855 | | | 54,607 | | | 54,053 | |
| Total | $ | 1,534,836 | | | $ | 1,543,792 | | | $ | 1,679,686 | |
Since the majority of the Company's containers are used internationally, where no one container is domiciled in one particular place for a prolonged period of time, all of the Company's long-lived assets are considered to be international.
The following table summarizes the geographic allocation of equipment trading revenues based on the location of the sale (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2024 | | 2023 | | 2022 |
| Total equipment trading revenues: | | | | | |
| Asia | $ | 14,367 | | | $ | 32,673 | | | $ | 71,739 | |
| Europe | 9,716 | | | 19,978 | | | 27,620 | |
| Americas | 15,824 | | | 23,897 | | | 43,120 | |
| Bermuda | — | | | — | | | — | |
| Other International | 8,730 | | | 19,450 | | | 5,395 | |
| Total | $ | 48,637 | | | $ | 95,998 | | | $ | 147,874 | |
Note 13—Income Taxes
The Company is a Bermuda exempted company. Bermuda does not currently impose a corporate income tax. The Company is subject to taxation in certain foreign jurisdictions on a portion of its income attributable to such jurisdictions. The two main subsidiaries of Triton are Triton Container International Limited ("TCIL") and TAL International Group ("TAL"). TCIL is a Bermuda exempted company and therefore no income tax is imposed. However, a portion of TCIL’s income is subject to taxation in the U.S. TAL is a U.S. company and therefore is subject to taxation in the U.S.
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth income tax expense (benefit) for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Current taxes: | | | | | |
| Bermuda | $ | — | | | $ | — | | | $ | — | |
| U.S. | 50,604 | | | 45,861 | | | 46,380 | |
| Foreign | 563 | | | 580 | | | 952 | |
| $ | 51,167 | | | $ | 46,441 | | | $ | 47,332 | |
| Deferred taxes: | | | | | |
| Bermuda | $ | — | | | $ | — | | | $ | — | |
| U.S. | (2,350) | | | 8,010 | | | 23,522 | |
| Foreign | (14) | | | 13 | | | (47) | |
| (2,364) | | | 8,023 | | | 23,475 | |
| Income tax expense (benefit) | $ | 48,803 | | | $ | 54,464 | | | $ | 70,807 | |
| | | | | |
Included in the Company’s U.S. current taxes is a $2.3 million income tax benefit from the purchase of investment tax credits related to property placed in service during 2024. The Company has chosen to account for these credits under ASC740 using the flow-through method of accounting to reduce its 2024 U.S. federal income tax expense. Refer to Note 16 - "Related Party Transactions" for additional details related to the Tax Credit Transfer Agreement.
The following table sets forth the components of income (loss) before income taxes (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Bermuda sources | $ | 308,711 | | | $ | 325,453 | | | $ | 532,391 | |
| U.S. sources | 256,967 | | | 201,960 | | | 284,468 | |
| Foreign sources | 1,320 | | | 1,140 | | | 870 | |
| Income (loss) before income taxes | $ | 566,998 | | | $ | 528,553 | | | $ | 817,729 | |
The following table sets forth the difference between the Bermuda statutory income tax rate and the effective tax rate on the Consolidated Statements of Operations for the periods indicated below:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Bermuda tax rate | — | % | | — | % | | — | % |
| Change in enacted tax act | (0.52) | % | | 0.86 | % | | 0.66 | % |
| U.S. income taxed at other than the statutory rate | 9.18 | % | | 8.54 | % | | 7.58 | % |
| Effect of uncertain tax positions | — | % | | — | % | | (0.06) | % |
| Foreign income taxed at other than the statutory rate | 0.09 | % | | 0.10 | % | | 0.16 | % |
| Effect of permanent differences | 1.01 | % | | 0.75 | % | | 0.10 | % |
| Effect of investment tax credit purchase | (0.41) | % | | — | % | | — | % |
| Other discrete items | (0.74) | % | | 0.05 | % | | 0.22 | % |
| Effective income tax rate | 8.61 | % | | 10.30 | % | | 8.66 | % |
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the components of deferred income tax assets and liabilities (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Deferred income tax assets: | | | |
| Net operating loss and interest expense limitation carryforwards | $ | 10,378 | | | $ | 6,244 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Deferred income | 2,172 | | | 2,344 | |
| Accrued liabilities and other payables | 3,758 | | | 5,191 | |
| Total deferred tax assets | $ | 16,308 | | | $ | 13,779 | |
| | | |
| | | |
| | | |
| Deferred income tax liabilities: | | | |
| Accelerated depreciation | $ | 286,914 | | | $ | 321,494 | |
| Deferred partnership income (loss) | 133,656 | | | 100,961 | |
| | | |
| Goodwill and other intangible amortization | 4,066 | | | 4,055 | |
| Derivative instruments | 1,346 | | | 3,170 | |
| | | |
| Other | 850 | | | — | |
| Total deferred tax liability | 426,832 | | | 429,680 | |
| Net deferred income tax liability | $ | 410,524 | | | $ | 415,901 | |
At December 31, 2024, the Company had U.S. state net operating loss carryforwards of $7.6 million that expire at various times beginning in 2025 and net interest expense limitation carryforwards of $46.2 million that have an indefinite carryforward period.
The Company has not recorded a valuation allowance for deferred tax assets as of December 31, 2024 or 2023. In assessing the potential future realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, the Company believes it is more likely than not that the Company will realize the benefits of these deductible differences as of December 31, 2024.
Certain income taxes on unremitted earnings have not been reflected on the Consolidated Financial Statements because such earnings are intended to be permanently reinvested in those jurisdictions. Such earnings and related income taxes are estimated to be approximately $520.8 million and $156.1 million, respectively, as of December 31, 2024.
The Company did not record any unrecognized tax benefits for the years ended December 31, 2024 or 2023.
The Company files income tax returns in several jurisdictions including the U.S. and certain U.S. states. The tax years 2021 through 2024 remain subject to examination by major tax jurisdictions.
The Company accrues interest and penalties related to income taxes in the provision for income taxes. The following table summarizes interest and penalty expense (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2024 | | 2023 | | 2022 |
| Interest expense (benefit) | $ | — | | | $ | — | | | $ | (86) | |
| Penalty expense (benefit) | $ | — | | | $ | — | | | $ | (98) | |
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the components of income taxes payable included in Accounts payable and other accrued expenses on the Consolidated Balance Sheets (in thousands):
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| Corporate income taxes payable | $ | 205 | | | $ | 99 | |
| Unrecognized tax benefits | — | | | — | |
| Interest accrued | — | | | — | |
| Penalties | — | | | — | |
| Income taxes payable | $ | 205 | | | $ | 99 | |
Note 14—Other Postemployment Benefits
The Company's U.S. employees participate in a defined contribution plan. Under the provisions of the plan, an employee is fully vested with respect to Company contributions after four years of service. The Company matches employee contributions of 100% up to a maximum of $6,000 of qualified compensation and may, at its discretion, make voluntary contributions. The Company's contributions were $0.8 million for each of the years ended December 31, 2024, 2023 and 2022.
Note 15—Commitments and Contingencies
Container Equipment Purchase Commitments
As of December 31, 2024, the Company had commitments to purchase equipment in the amount of $15.8 million to be paid in 2025.
Contingencies
Legal Proceedings
The Company is party to various pending or threatened legal or regulatory proceedings arising in the ordinary course of its business. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. Triton records liabilities related to legal matters when the exposure item becomes probable and can be reasonably estimated. Management does not expect these matters to have a material adverse effect on Triton’s financial condition, results of operations, or liquidity. However, these matters are subject to inherent uncertainties and it is possible that a liability arising from these matters could have a material adverse impact in the period in which the uncertainties are resolved, depending in part on the operating results for such period.
In connection with the Merger, a putative Triton shareholder filed two petitions demanding an appraisal of its shares under Bermuda law in the Supreme Court of Bermuda. During the second quarter of 2024, the parties entered into a settlement to resolve all claims brought by the petitioner in connection with the appraisal rights proceedings. Settlement and other costs incurred in connection with the proceedings are included in Transaction and other costs in the Consolidated Statements of Operations.
Note 16—Related Party Transactions
The Company holds a 50% interest in Tristar Container Services (Asia) Private Limited ("Tristar"), which is primarily engaged in the selling and leasing of container equipment in the domestic and short sea markets in India. The Company's equity investment in Tristar is included in Other assets on the Consolidated Balance Sheets. The Company received payments on finance leases with Tristar of $2.0 million for both the years ended December 31, 2024 and 2023. The Company has a finance lease receivable balance with Tristar of $3.9 million and $5.7 million as of December 31, 2024 and 2023, respectively.
The Company entered into a Tax Credit Transfer Agreement on October 29, 2024 to purchase $33.0 million of solar investment tax credits from Urban Grid, a Brookfield renewable energy company. The investment tax credits offset approximately 75% of Triton’s current federal taxable income in 2024. The Company paid Urban Grid $30.7 million for the
TRITON INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
investment tax credits and recorded a $2.3 million income tax benefit on the Consolidated Statement of Operations for the year ended December 31, 2024.
In connection with a share purchase agreement entered into between a third-party investor and Parent in December 2024, Triton expects to distribute all of the equity interests in TCF VIII, a special purpose securitization subsidiary of Triton, to Parent (the "TCF VIII Distribution"). As of December 31, 2024, TCF VIII had total assets of approximately $1.9 billion and total indebtedness of approximately $1.4 billion, and for the year ended December 31, 2024, TCF VIII had leasing revenues of approximately $0.3 billion. The TCF VIII Distribution is expected to reduce Triton’s total shareholders’ equity by approximately $0.5 billion. Following the completion of the TCF VIII Distribution, the Company will continue to manage the containers in the TCF VIII securitization portfolio, for which the Company will be entitled to receive management fees. The TCF VIII Distribution is subject to a number of conditions precedent, including regulatory approvals, and is expected to be completed during the first half of 2025.
Note 17—Subsequent Events
On February 14, 2025, the Company's Board of Directors approved and declared a cash dividend of $150.0 million on its issued and outstanding common shares to Parent, payable on February 24, 2025.
On January 27, 2025 the Company's Board of Directors approved and declared a cash dividend on its issued and outstanding preference shares, payable on March 15, 2025 or the next business day thereafter to holders of record at the close of business on March 10, 2025 as follows:
| | | | | | | | | | | | | | |
| Preference Share Series | | Dividend Rate | | Dividend Per Share |
| Series A | | 8.500% | | $0.5312500 |
| Series B | | 8.000% | | $0.5000000 |
| Series C | | 7.375% | | $0.4609375 |
| Series D | | 6.875% | | $0.4296875 |
| Series E | | 5.750% | | $0.3593750 |
On February 6, 2025, the Company completed a public offering of the Series F Preference Shares and received $144.6 million in aggregate net proceeds after deducting underwriting discounts and estimated offering expenses of $5.4 million. The net proceeds from the sale of Series F Preference Shares will be used for general corporate purposes, including the purchase of containers, payment of dividends and repayment or repurchase of outstanding indebtedness.
